Pepsi 2015 Annual Report Download - page 88

Table of Contents
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The table below reconciles net cash provided by operating activities, as reflected in our cash flow statement,
to our free cash flow excluding the impact of the items below.
% Change
2015 2014 2013 2015 2014
Net cash provided by operating activities $ 10,580 $ 10,506 $ 9,688 18
Capital spending (2,758)(2,859)(2,795)
Sales of property, plant and equipment 86 115 109
Free cash flow 7,908 7,762 7,002 211
Discretionary pension and retiree medical contributions
(after-tax) —274 20
Pension-related settlements (after-tax) 57 ——
Payments related to restructuring charges (after-tax) 163 215 105
Net capital investments related to restructuring plan —88
Net payments related to income tax settlements —— 984
Net capital investments related to merger and integration ——(4)
Merger and integration payments (after-tax) —— 21
Payments for restructuring and other charges related to the
transaction with Tingyi (after-tax) —— 26
Free cash flow excluding above items $ 8,128 $ 8,259 $ 8,162 (2)1
In all years presented, free cash flow was used primarily to pay dividends and repurchase shares. We expect
to continue to return free cash flow to our shareholders through dividends and share repurchases while
maintaining Tier 1 commercial paper access, which we believe will ensure appropriate financial flexibility
and ready access to global capital and credit markets at favorable interest rates. However, see “Our borrowing
costs and access to capital and credit markets may be adversely affected by a downgrade or potential
downgrade of our credit ratings.” in “Item 1A. Risk Factors” and “Our Business Risks” for certain factors
that may impact our credit ratings or our operating cash flows.
Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment
grade, whether or not as a result of our actions or factors which are beyond our control, could increase our
future borrowing costs and impair our ability to access capital and credit markets on terms commercially
acceptable to us, or at all. In addition, any downgrade of our current short-term credit ratings could impair
our ability to access the commercial paper market with the same flexibility that we have experienced
historically, and therefore require us to rely more heavily on more expensive types of debt financing. See
“Our borrowing costs and access to capital and credit markets may be adversely affected by a downgrade or
potential downgrade of our credit ratings.” in “Item 1A. Risk Factors,” “Our Business Risks” and Note 9 to
our consolidated financial statements.
Net Return on Invested Capital
ROIC is a metric management uses to monitor the profitability of our utilized capital. We believe this metric
balances our operating results with asset and liability management, and may contribute to long-term
shareholder value creation. In addition, we use net ROIC, excluding items affecting comparability, to compare
our performance over various reporting periods on a consistent basis because it removes from our operating
results the impact of items that are not indicative of our ongoing performance and reflects how management
evaluates our operating results and trends. We believe the calculation of net ROIC, excluding items affecting
comparability, provides useful information to investors and is an additional relevant comparison of our
performance to consider when evaluating our capital allocation discipline. Net ROIC, excluding items
affecting comparability, is not a measure provided by GAAP. Therefore, it is not, and should not be, viewed
as a substitute for ROIC.